Shriver Center: September 2006

Perspective: A Medicaid Block Grant Is Not a Wise Idea for Illinois

2006-09-19T22:00:07Z

State Treasurer Judy Barr Topinka, the Republican candidate for governor of Illinois, recently announced her position and plans for Medicaid, the state’s health insurance program for low-income people who are aged, disabled, children, or the children’s mostly employed parents. Medicaid and related health coverage programs now cover about 1.8 million Illinois residents, including over a million children. Among Treasurer Topinka’s ideas for the Medicaid program is to ask the federal government to change the funding of the program from open-ended matching funds to a flat block grant.

Switching to a federal block grant for Medicaid is a good strategy only if the intent is to cut the program without owning up to any intent to do so. Because of a block grant’s inherent weakness over time in keeping up with the natural growth of health care costs, a Medicaid block grant will inevitably put Illinois into a funding bind by limiting the federal share. This straitjacket will expose Illinois to inexorable fiscal pressures that will dictate program cuts or substantial new state spending to replace the lost federal dollars.

If the purpose is to cut health care spending at all costs, regardless of the public need, then a block grant may fit the purpose. But it can get a “handle” on health care costs only by providing less health care. And in so doing it sacrifices state control over health care decisions in order to attempt to avoid accountability for those decisions.

Current Medicaid Funding Method

The federal Medicaid program requires participating states to cover certain core populations and provide an array of basic medical services. Beyond that, the states have the option to cover more populations and provide more services. The states also have control over the amount paid to providers of services. Beyond the core coverages, Illinois spends as much of its own money on Medicaid as it wishes, and then the federal government reimburses half of it. The end result is a 50-50 split, with Illinois being in control of the total amount. If Illinois decides to spend $1 billion, then the federal government will reimburse $500 million. If Illinois decides to spend $10 billion, then the federal government will reimburse $5 billion.

This funding system gives Illinois the flexibility and financial security needed to respond to increases in expenses over which it has little control. For example, inflation in the overall private sector health care system in 2005 was about 14 percent. While Illinois managed to run its Medicaid program so that its inflation was only about 7 percent, this was still a significant increase. Under the current Medicaid funding scheme, however, the federal government reimbursed half of the increase. The matching grant system also helps Illinois in responding to increased health needs caused by unexpected events, such as an epidemic (AIDS, bird flu) or a natural disaster (tornadoes, floods).

Similarly, if a recession were to hit Illinois, people would lose their jobs, experience pay cuts, or experience the loss of employer-sponsored health insurance. This kind of economic cycle would fuel an increase in the Medicaid-eligible population, without any change in the Medicaid eligibility rules or coverages. Under the current Medicaid funding scheme, the expense of covering this increased need would be split with the federal government. This helps ensure that the program is there when it is needed most. The same sort of caseload growth seems certain to occur under the demographic shift anticipated with the aging of the baby boom generation. Under the current Medicaid funding system, the federal government will help Illinois by paying for half of this expected natural caseload growth.

The current Medicaid funding method gives Illinois more control over decisions about the program. Illinois may wish to cover more uninsured people by expanding eligibility as it has done in the past. Or it may decide to add new services based on emerging medical science—services that may cost more in the short run but save money in the long run. Or it may decide to increase amounts paid to medical providers (doctors, hospitals, etc.) to accomplish program goals or keep more and better providers in the system. Or it may wish to pay bills faster. Under the current Medicaid scheme, Illinois makes these decisions knowing that the federal government will help by paying for half of any increased expense. This gives Illinois much more freedom of movement than if it had to pay for the total of any such increase entirely with state funds.

How a Block Grant Would Change Medicaid Funding

Block grant funding would move away from the matching funds system. Instead Illinois would receive a predetermined amount of federal funding each year. Generally the block grant amount would be based on a base year of spending. The 1996 welfare (Temporary Assistance for Needy Families) block grant, for example, was based on the federal spending under the previous matching grant programs in 1994. However, that block grant remains at that same size ten years later, and it was recently renewed at the same level for another ten years. That block grant has lost about 30 percent of its spending power by failing to keep pace with inflation.

Most Medicaid block grant designs put forward by the Bush administration contain modest cost-of-living escalators, but none of them is based on health care inflation, which is much larger than the regular cost of living. Most block grant designs also contain some sort of front-end sweetener, so that the first year or two of the block grant seems likely to produce more federal funds than the state might otherwise get from the current matching grant system. These disappear after a short period, as the block grant fails to keep pace with inflation, caseload growth, and other cost factors that the matching grant system is sensitive to but the block grant system is not. The Bush administration, in its desire to limit federal Medicaid spending, hopes that such sweeteners will entice states to fall for block grants.

The block grant sets the upper limit of federal spending on Medicaid. Thus the entire burden of any increase in spending, whether or not due to factors the state can control, is on the state. If the state wants to meet the increased spending needs, it must do so with 100 percent state dollars. If the state does not want to or cannot produce those dollars, then it must cut the program to offset the increase either by eliminating categories of eligibility or types of services or by cutting rates to providers.

The Difference Between Medicaid and Welfare Block Grants

The welfare block grant of 1996 produced a “dividend” of federal welfare funds for the states because the welfare caseloads went down quickly and dramatically. As a result, for a number of years most states received more federal funding under the block grant than they would have under the prior matching funds system. This would not happen with a Medicaid block grant.

1. Policymakers universally wanted the welfare caseloads to go down and had new authority in the welfare law to make that happen through changes in eligibility rules and administrative tactics. Aided by the booming economy of the late 1990s, that is exactly what happened. But, quite to the contrary, most policymakers do not want the Medicaid rolls to go down, and they do not want to be responsible for adding elderly, disabled, children, and working parents to the rolls of the uninsured. Health insurance is far different from cash welfare assistance in the public mind. Treasurer Topinka herself stated in her Medicaid announcement that she had no desire or plans to deprive currently eligible Medicaid beneficiaries of health coverage.

2. Without any desire or plan to reduce caseloads dramatically, there is no likelihood of the welfare-type “dividend.” The only way to produce the “dividend” would be to find other savings that more than offset the annual pressures on Medicaid spending. That is, Illinois would have to slash either covered services or provider reimbursements. Some such economies may be possible without endangering beneficiaries’ health, but not on the scale necessary to offset the loss of federal matching funds over time.

3. There is no expectation of an economic boom similar to the late 1990s, and there is no reason to believe that such a boom would decrease the need for health insurance in any event. The numbers of uninsured went steadily upward even in the boom years.

4. All of the factors relevant to health coverage in fact point to increased need in the coming years. And most of these factors are not in the control of the states—inflation, economic conditions, demographics, unforeseen medical needs. Thus Illinois cannot “manage” its way around them. The loss of federal matching funds inevitably would produce loss of health care.

Keep State Control of Overall Spending

Medicaid is one of the last bastions of true state power with respect to federal-state finances. Yes, the federal program has coverage mandates. But Illinois is free to seek waivers of the parts of those mandates that it may feel are unwise for the state, and such waivers do not require Illinois to submit to block grant funding. And, notwithstanding the federal mandates, the matching grant funding gives Illinois control over the total spending. Whatever Illinois decides to spend or finds itself obligated to spend due to factors beyond its control, the federal government will come along for half, without any artificial ceiling on the federal share.

There certainly are economies to be obtained within Medicaid, and states can and should find and maximize them. None of those economies requires a switch to a block grant. Moreover, beyond simple “economies,” if Illinois wants to slash eligibility, provider rates, or covered services, it can do so without submitting to a block grant. Treasurer Topinka has not announced any such intent, but if that is what she intends to do, a block grant is not needed to accomplish it.

Any governor who decides to cut the Medicaid program can do so forthrightly under the matching grant system. Switching to a block grant is not the only way to make cuts, but it is the way that will irrevocably lose for Illinois control over this key source of health care funds. And what is lost is not only control over how and when to cut the program, but, more important, control over the availability of federal funds to help expand the program. This is what most Illinois residents care about the most—more decent health coverage, not less. We need to have the option to expand in order to meet inflation, meet increased demand, respond to scientific advances, or continue to make progress in covering the uninsured. A Medicaid block grant is unwise, risky, unnecessary, and ultimately a recipe for less health care in Illinois. Treasurer Topinka should reconsider her support of this strategy.

For more information on this piece, please contact the author.

Holding Congress Accountable for the State of Poverty

2006-09-19T15:03:57Z

As elected officials, members of Congress are obligated to represent every individual in their district or state, regardless of income. Sadly, judging by their voting records, some members ignore their responsibilities to serve their poorest constituents. There could be many reasons for this (low voter turnout and even lower levels of financial contribution to candidates), but while these may be explanations, they are certainly not excuses. The Sargent Shriver National Center on Poverty Law insists that legislators seek to represent every citizen fairly.

For this reason, we've created the State of Poverty: 2006 Congressional Midterm Report. We must hold members of Congress accountable to represent the needs of the poorest among us.

The Shriver Center chose six bills from both houses of Congress, each focusing on issues affecting low-income people. We examined the corresponding votes of Congress to determine how often each elected official voted with their low-income constituents. The State of Poverty, with 37 million residents, is our nation's most populous state. We were disappointed to see that many members of Congress blatantly disregarded the needs of its residents.

Some of those members represent the Gulf Region. One in four Mississippians make less than $15,000, yet Senators Cochran and Lott scored 33% and 17% when it came to voting to advance the interests of their low-income constituents. In Alabama, where, according to Census statistics from 2005, 46.7% of African American children live in poverty, neither Senator Sessions nor Senator Shelby voted with low-income families on a single bill identified in our midterm report.

This lack of leadership was not relegated to the Gulf Region. Democratic Representatives Rick Larsen and Brian Baird of the state of Washington voted to repeal the Estate Tax, as did the entire House delegation of West Virginia (two Democrats and one Republican), despite the fact that 0.5% and 0.2% of decedents in those states paid the tax in 2003. In New Mexico's 2nd District, Rep. Steven Pearce voted against LIHEAP, a program that helps poor Americans pay their energy bills, even though one in four of his constituents would have been eligible for the aid. In Kentucky's 5th District, Rep. Harold Rogers voted with low-income people only once in our report. Yet, the median income in his district is $22,000, eight counties in the district have a per capita income less than half that, and 28.1% of his constituents are at or below the federal poverty line.

Our scorecard, of course, can only provide a picture about performances on legislation that was allowed to move at all in Congress. There is no report, for example, on legislation to provide healthcare for all of America's children, or a bill to address in some significant way the crisis of affordable housing. We are disappointed with many votes on the record, but we are more disappointed at the lack of significant action and an unwillingness even to consider and debate the pressing issues of need, equal opportunity, and economic justice. As a body, Congress is ignoring the State of Poverty, and that affects us all.

For more information on the 2006 Congressional Midterm Report, contact Rikeesha Cannon. Download your free copy at http://www.povertylaw.org//advocacy/publications/scorecard.pdf.

September 2006 Poverty Action Report

2006-09-18T17:01:06Z

Our Week in the Gulf: “Gutting New Orleans”

2006-09-19T15:06:30Z

During the first week of August, we worked in New Orleans with Habitat for Humanity’s St. Bernard Recovery Project. Hurricane Katrina wrought heavy structural damage on 100 percent of the residential and commercial units of St. Bernard Parish, located southeast of New Orleans.

Before we left Chicago, we were unsure what to expect. Miles before passing through New Orleans, we realized that the effects of Katrina reached far outside the city limits. When we arrived, Habitat assigned us to a team. Jason, the safety officer, explained what we would be doing throughout the week. Jason is a 22-year-old volunteer and inexperienced in demolition. Jason’s position illustrates a larger problem. The St. Bernard Recovery Project is run entirely by volunteers without any supervision from federal or local government agencies. Throughout the week, we realized that inexperienced, though dedicated, volunteers had led and still continue to lead the entire rebuilding effort.

As we entered the first house we were assigned to gut, we were overwhelmed by the damage. It’s hard to fathom a house filled with 16 feet of water, but when you walk inside and see a refrigerator on top of an upside-down couch in the living room, it’s easier to imagine.

Gutting houses couldn’t compare to meeting the people who survived the disaster. Antipoverty advocates often talk about those who survived the storm, but few have the opportunity to meet them. We met a woman who survived the storm, and when we asked how she was doing, she answered, “My home survived.” After speaking to her for a few minutes, we learned that four of her friends committed suicide after the storm, her son went missing for two months, and she was living in her gutted home without electricity. Other residents who had expected to salvage a truckload of valuables spoke about coming home after the evacuation with a moving truck but ended up leaving with a shoebox.

During the week, we had three encounters with FEMA. Our first encounter was drinking expired water that FEMA donated to the camp. Our second encounter was seeing a woman, instead of opening her front door, walk up to her home and, nearly a year after Katrina, enter the FEMA trailer parked in her driveway. Our final encounter was experiencing communication problems after FEMA removed the repeater device that allowed the radios to function.

We worked hard every day to clean one home. The number and the diversity of volunteers tell how Americans are willing to take time from their lives to help rebuild New Orleans. If only our national government shared their commitment.

Economic Shifts Render Children Vulnerable to Poverty

2006-09-19T15:07:28Z

The increase in child poverty in the Midwest since 2000 by 29 percent, compared to 12 percent for the entire United States, is largely due to macroeconomic trends rather than family characteristics such as parent’s employment status, level of education, or nativity, according to the National Center for Children in Poverty in a report entitled “The New Poor” released last month. The Midwest accounts for nearly half of the increase nationwide.

As the report documents, “the Midwest has experienced a 29 percent increase in the number of children living in poor families, rising from 2.2 million in 2000 to more than 2.8 million in 2004. With over 634,000 children added to the poverty rolls of the region, this rise in child poverty was by far the largest in any of the four regions over the last five years and has been the driving force behind the overall increase at the national level.”

The Midwest, which has yet to recover fully from the 2001 recession, is the only region in the country where poverty increased among children with employed parents. Even so, the Midwest’s increase in child poverty rose the most not only among children whose parents were employed but also among children whose parents did not have a college education. This was not the case for other regions in the United States. In the South, for example, the rise in poverty occurred the most among immigrant children compared with the children of native-born parents.

Service-sector jobs—jobs that pay lower wages, have fewer options for full-time employment, and are less likely to offer health insurance or paid leave—have gradually filled the loss of manufacturing jobs in the Midwest. But such jobs, the report concludes, are not enough to keep families out of poverty. Public benefit programs (food stamps, Temporary Assistance for Needy Families, and Medicaid) are a necessary buffer for harsh economic trends.

See http://nccp.org/media/npr06_text.pdf. For more information, contact Wendy Pollack at 312 263 3830 ext. 238. Tina Hernandez Lasquety and Andrew Hammond wrote this article.

New Video on High School Students Who Run Banks

2006-11-10T18:11:47Z

Branching Out, a new video release from the Sargent Shriver National Center on Poverty Law, shows the real-life story of high school students running bank branches in their schools. Those branches are the Curie Branch of Park Federal Savings Bank at Curie Metro High School in Chicago and the Cardinal Branch of Mitchell Bank at South Division High School in Milwaukee, Wisconsin.

The video illustrates how bank branch programs are offering high school students real-world work experience, financial skills, and assets and strengthening their career ambitions. The student-run bank branches are located inside public high schools with high Latino, African American, and immigrant populations.

The video also features the Boys and Girls Club of the Mississippi Valley in Moline, Illinois. Local business leaders plan a full-service bank branch staffed by Boys and Girls Club youth and thus expand the concept of student-run banks beyond the walls of a school to teen centers.

View Branching Out at http://www.povertylaw.org//advocacy/community-investment/curie-video/branching-out-the-story-of-student-run-banks.html. Contact Patrick Hain of the Shriver Center at 312 368 1104 for more information.

Targeting Poverty: Aim at a Bull’s Eye

2006-09-19T15:11:55Z

The Center on Law and Social Policy recently released Targeting Poverty: Aim at a Bull’s Eye, a report that discusses why poverty is emerging as a political issue, why it is an issue that is above partisan politics, and what efforts are underway across the country to codify poverty target legislation.

In its report, CLASP suggests several reasons why poverty is emerging on political agendas including the news coverage of Katrina, the fear by those who are not poor that they may become poor, and that the gap between the rich and the poor is worrying everyone from Alan Greenspan to U.S. Treasury Secretary Henry Paulson.

CLASP also makes the case that poverty is purple—or in other words, it is not an issue relegated to red states or to blue states, but rather, that it exists in all states. As the report points out, “Of the ten states with the highest child poverty rate, six have Republican and four have Democratic Governors.”

Perhaps the most interesting part of the report is the section that consolidates news about efforts across the country by state legislators, mayors, and activists to pass legislation that would commit their respective state or city to reducing poverty by a certain amount, by a specific date. For instance, Connecticut passed a law to reduce child poverty by 50 percent by the year 2014. California has a similar bill awaiting Governor Schwarzenegger’s signature. Mayors from cities all over the country—New York, Miami, and Milwaukee to name a few—are declaring poverty to be a central issue facing their communities.

As the report rightly concludes, “Poverty targets signify political commitment.” This kind of legislation moves policymakers beyond the nihilistic question of whether or not we can do anything to reduce poverty, to the much more worthwhile question of what must we do to meet such an important goal.